Innovate from the customer backwards- but caveat innovator!



The insurance industry is in large part past the hysteria of disruption, innovation and entrants solving the issues of the insurance world, and is moving into the stage of implementation, collaboration and iteration. Startups that have gained traction are now broadening their markets, and in some cases, their offerings. And, the industry is recognizing that innovation is good, prevention is better, and combination of the two is best. But is prevention without issues? Can a large gray beast show the way?

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

It’s Thanksgiving Day holiday in the U.S., having a sumptuous feast with families and friends is de rigueur so this column may serve as an appetizer.  For those many readers outside of the feasting zone- perhaps serve as a substitute for your almond Khari tea biscuit, scone, pastelito, kuchen or kaya.


Prevention in P&C insurance has to date been a tech/device driven effort- telematic plug-ins like State Farm’s Drive Safe and Save developed by Cambridge Mobile Telematics, home moisture sensors, or driving habits observed by DriveWise or Snapshot. Getting customer buy-in has been a barrier to general adoption, as has been how to manage the cost of a program and how regulators might see programs where carriers provide equipment or premium reductions.

Some jurisdictions do not allow rebates or inducements, or activity that seems as such, however, the U.S. state of Florida recently announced passed legislation where the Department of Insurance is exempting certain prevention devices (read as IoT) from the insurance laws regarding inducements.  The state sees there is technology available that will serve to reduce frequency and severity of claims, and with some oversight will not act as policy inducements.

The Iot Observatory championed by Matteo Carbone has chronicled successes with IoT/prevention activities, particularly in the Italian motor insurance industry and positive steps taken by American Family Insurance (as reported by Coverager) in the US.

Additionally, German plumbing fixture company Grohe and Finnish insurer LähiTapiola recently announced and implemented a water sensing device initiative, with an estimated 100K installations planned by 2026.

Good efforts in these initiatives, but all typically emanate from the company to the customer.  Can value-addition for preventive insurance claim measures be a reasonable expectation?  Can customer engagement in prevention be an answer?  Perhaps yes, with the efforts of an active insurance startup, Hippo Insurance (already a forward-thinking carrier) in conjunction with the firm’s recent acquisition, Sheltr, a home maintenance and inspection service.  An apt case study of considering the customer as a focus of innovation and adopting operating strategy from that perspective.

The premise of the Hippo/Sheltr partnership is that a combination of periodic, comprehensive dwelling inspections will not only identify potential repair issues, but will through time and attention gain the involvement of homeowners in the prevention business, and by extension reductions in the frequency and severity of claims.  It’s not a new concept- auto owners conduct preventive measures programs now without considering the action to be anything other than part of auto ownership.  Of course, knowing that failing to have oil changed would lead to mechanical failure that would probably not be an auto insurance covered peril makes moral hazard is not an issue in that instance as dwelling maintenance and having homeowners’ insurance might produce.

Hippo Insurance has since its founders, Assaf Wand  and Eyal Navon conceived and rolled out the company felt responsible for end to end positive customer experience.  In discussion with Hippo’s VP of Growth Initiatives, Daniel Blanaru, the company’s concept of service was referenced as, “The Hippo Way.”  How has that manifested within the customers’ true experience?  NPS scores that significantly exceed the industry’s.  As the company’s geographic growth reached multiple US states the firm strategically vetted multiple potential partners to help build the vision of not just an insurance company, but an end to end service company that included proactive/prevention options as well.

Sheltr was identified as the option best able to synch with Hippo’s service concepts- excellent team caliber, apt tech leverage, ease of onboarding into Hippo’s culture, and a proven culture of customer communication.  Seemingly a very good choice.

But here comes I, veteran of property insurance, property claims, and obsessive customer experience person.  I read the announcement and thought, “Here comes another effort to mate insurance service, indemnification, and repair options!”  Realizing the homeowners’ insurance claim experience has been littered with the worn failures of contractor partnerships, flooring programs, TPAs (although some remain very successful to this date), and inspection services, speaking with Hippo might find a different take on that aspect of claim handling.

As much as Hippo had shown a proactive, ‘NPS is the True North of service’ approach, efforts to canonize the firm are surely premature.

Concerns that came to mind with the addition of an inspection and preventive maintenance company to the CX path on which Hippo’s customers are led included:

  • Will inclusion of the inspection/maintenance services to the insurance PIF portfolio be seen by regulators as a form of rebates or inducements?
  • Would customers be denied coverage if they fail to take action on an identified problem and a claim ensues?
  • How will CX perceptions be affected if a referred repair vendor performs inadequately?
  • Customer survey results are affected in a linear fashion as providers are added to the service chain, so even if each participant rates service as 98% effective, having four equal providers (insurer, adjuster, inspection co., and repair service provider) produces a net service effect result of 92%, not what the firm’s expectations are.
  • Having an inspection that identifies an issue may not reduce the effects of moral hazard for the customer since they know insurance will respond to any claim issues.
  • Can the inspection service and network of repair contractors be adequately grown to keep up with growth of insurance PIF?

These are not concerns that relate solely to the Hippo/Sheltr service partnership but can be in any prevention service environment.  How to engage the customers is the key, driving adoption of a preventive actions approach for the customers. Hippo had found that a majority of cases that had a prior preventive aspect resulted in significantly mitigated effects of damage when claims occurred.  Having the added service provided by Sheltr’s 30 item semi-annual inspection and repair regimen is expected to result in lower frequency and severity of claims, but as the relationship is new and the concept is just that, the firm is in ‘observation and adapt’ mode as of the writing of this article.  It’s really a behavioral economics experiment, not a charitable giveback approach for claim mitigation as with Lemonade, but a participative, preventive approach encouraging customer participation through early identification and remedying of concerns.  How many, how much, how scalable, not known at this early juncture per Mr. Blanaru. But it’s an effort taken to innovate from customer involvement backwards to insurance operations (and surely underwriting).  The bulleted points noted above did elicit a response from Hippo but those will remain outside of this article as in all fairness the relationship between the firms is too new to call.  However- having awareness of past industry failures surely helps with not repeating history.

Prevention innovation does have its tech aspects but Hippo may find its customer focus on prevention, end-to-end service through claim concierge principles, and careful growth without sacrificing service standards will make the Hippo/Sheltr approach successful.  It’s not just Hippo’s customers who will benefit from service ‘innovation from the customer backwards’, but any company in the industry who remains an observer of this iteration of the vendor partner experiment.

Thanks to Courtney Klosterman, MyHippo PR maven,  for background info.

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